The study uses a quantile regression to investigate the role of government actions to enhance welfare. Instead of using the Human Development index as a broad indicator of welfare, the analysis focuses on life expectancy at birth, which is more specific and pertinent for the case of less advanced economies. In addition to life expectancy, infant mortality rate is used as additional indicator. To avoid a bias in the estimates generated by a double count of the variable aid, the residual from the regression of social spending on aid is used, instead of the variable social spending itself, as some portions of government social spending are financed by aid. Results reveal that aid does not directly affect welfare. On the opposite, government social spending contributes to increase life expectancy, reduces infant mortality, and therefore plays an important role in the improvement of welfare. In addition, the impact of social spending on welfare appears stronger in the countries with poor welfare indicators, than the countries with relatively better welfare indicators.
Keywords: Aid, Quantile Regression., Social Spending, Welfare
